By Roger Robinson, Owner of StarGroup at www.Stargroup.com
What information do you need to make the right lease or purchase decision, and how do you go about obtaining it? It can be easy to feel overwhelmed by the amount and quality of information you need to consider.
The condition of the property’s major systems and their remaining lifespan is critical information for buyers and potential leasers. Any system failure can be detrimental to business operations. Signing a triple net lease can put you at risk to make substantial repairs to the roofing, heating, air conditioning, and other systems should failures occur during the lease period.
Many building owners are now setting up reserve funds: holding money aside to make needed ongoing capital maintenance. A reserve study, provided by an independent professional firm, can protect you from unexpected expenses by determining the appropriate dollar amounts the owner must set aside each month to replace roofs; install new HVAC systems; repair, re-coat, or replace asphalt surfaces and other items when needed.
The best source of reliable information may not be the same company you select to install the improvements or correct problems. A roofer or HVAC contractor who has been responsible for performing maintenance on the building may not be able to provide you with the objective information you need. Contractors, because they have a financial interest, may be less than completely accurate in their assessments of system conditions.
A basic property condition assessment or inspection report should include conditions of the basic building components such as roofing, heating and air conditioning (HVAC), interior and exterior surfaces, and the building’s structural components. Buyers and potential leasers have unique needs, depending on the nature of their contractual arrangements, anticipated future use, and the type of building being considered. It is important to tell the inspector about any significant modifications you are planning to make to the building and any changes in how the property will be used.
How many buildings are on the property? What is was the year of construction? Have there been any substantial tenant improvements or other modifications to the building? Have proper building permits been taken out for any changes to the building, and were they finalized?
How old is the current roof? Is there any history of roof leaks, and what is the history of subsequent repairs and related costs? What kind of heating-cooling or HVAC system does the building have? For example, does the facility have a central plant system, split systems, roof or ground level package units, boilers, chillers, cooling towers etc. How old is the HVAC equipment and how often has it been maintained?
If the building was constructed prior to 1975, has it been seismically upgraded? If the exterior walls are concrete tilt-up or reinforced masonry, have the wall-to-roof connections been reinforced according to the 1991 Uniform Building Code?
Has a Phase One Environmental Study been performed and is it available for review?
Are the restrooms, hallways, doors, elevators, parking areas, and other such features designed to provide access to the disabled? Will the building require any substantial modifications to comply with state and national ADA requirements, and what events could trigger a requirement to upgrade to achieve accessibility for the disabled?
Is there a current elevator certification on file? Has an elevator safety test been performed within the last five years? Is there a fire sprinkler system and when was it last inspected and tested?
Certain items are especially useful to the inspector prior to beginning the actual assessment. A set of building plans will help the inspector locate the various components and establish the type and date of construction. HVAC and elevator maintenance records will help determine the extent of any previous repairs and ongoing maintenance.
One outcome of having a thorough property condition evaluation is the peace of mind that results from knowing where the property stands in terms of the condition of its components and any anticipated repairs, upgrades, and system replacements. The new owners and occupants can get on with their business operations, knowing they have substantially reduced the potential for unpleasant and expensive surprises.